THE European Union was given the green light by the World Trade Organisation (WTO) yesterday to impose millions of euros of punitive duties on American exports, ranging from sweetcorn to textiles and sportswear.

Permission for the sanctions was given after Washington’s failure to repeal the Byrd amendment, despite WTO condemnation of the measure almost two years ago. The international trade referee ruled that the practice of handing over to American firms the duties raised in anti-dumping cases brought by the companies themselves was a double penalty against foreign competitors.

During the past three years the Bush Administration has distributed about $800 million (£422 million) collected in fines levied on European, Canadian, Brazilian, Japanese, Indian, Korean and Mexican exporters.

The decision on whether to press ahead with the sanctions, worth $150 million, if the US does not bring its legislation into line with WTO rules will be an early test for Peter Mandelson as the EU’s new Trade Commissioner. He would not comment on the ruling yesterday, but in a statement the European Commission gave warning that it “would impose retaliatory measures early in 2005” if the Byrd amendment were not repealed.

The US Administration has called on Congress to repeal the law, named after the Democrat Senator Robert Byrd. But the measure is supported widely as a way of punishing foreign companies accused of dumping their goods on the US market. The EU and the six other plaintiffs have drawn up a list of American exports that could be hit by additional import duties. They include items of male and female clothing, plastic furniture, ballpoint pens, electric drills and even mobile homes.

Tension over the matter is just one of several trade disputes between the EU and US. Both are accusing the other before the WTO of paying illegal subsidies to their main civil aviation companies, Airbus and Boeing.